With the passing of the General Agreement on Tariffs and Trade (GATT)
in 1994, both import quotas via minimum access requirements and tariffs
now apply to the Canadian supply-managed sectors. Minimum access
commitments were increased slightly; however, tariffs on imports beyond
these commitments appear to be prohibitive in many cases -- at least in
the short run. The cartel will not be as easily held together today as it was
under Article XI of GATT.

Introduction

Trade between the United States and Canada in supply-managed
commodities, such as chickens, has always been a contentious issue. When
supply management was instituted in Canada, three pillars were established:
1) cost of production formula, 2) base and over-base production quotas and
3) import quotas. The latter, which significantly restricted the exportation of
US goods into Canada, was allowed under Article XI of GATI because import
quotas were used in combination with domestic production controls. The
supply management system, because of its direct use of production controls
and import quotas, generated significant rents for producers and importers
( Schmitz and
Schmitz, 1994) but was costly for consumers ( Veeman, 1982).
As a result, any attempts to lower trade barriers were opposed by special
interest groups. This was certainly true in the Uruguay Round of GATT when Canada finally agreed to the tariffication of its border protection in the dairy,
poultry and egg sectors. Throughout the negotiations, Canada argued against
tariffication. of border measures, preferring that Article XI be strengthened
rather than weakened. A major impetus for this position was the concern by
producers that protection afforded them through production and import
quotas would be diminished.

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